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US stock market daily report (February 11, 2013, Monday)

February 12, 2013, Tuesday, 06:19 GMT | 02:19 EST | 11:49 IST | 14:19 SGT
Contributed by Millennium Traders

According to semi-monthly data from the the New York Stock Exchange and Nasdaq, short interest in stocks declined in the second half of January from previous half-month period. Short interest for NYSE totaled 12.79 billion shares as of January 31, down from 12.83 billion shares in previous period with short position of 5,000 or more shares existing in 3,719 issues and with some short positions shown in 4,514 issues. Short interest for Nasdaq totaled 7.19 billion shares of 2,648 securities as of January 31, compared with 7.2 billion shares of 2,651 securities as of January 15. A short sale is the sale of a security that the seller does not own or any sale that is completed by the delivery of a borrowed security.

The benchmark index is up more than 6.4% in 2013, putting both the S&P 500 and Dow industrials near multi-year highs. The S&P is less than 4% from its all-time intraday high of 1,576.09 from high in October 2007. On Monday, U.S. stocks finished slightly lower on the lightest trading volume day of 2013, bumping Friday’s low volume for the honored position. Any trader partaking in the market action today, clearly felt the lull of activity.

Federal Reserve Vice-Chair Janet Yellen told a conference sponsored by the AFL-CIO labor union, "We have our foot, not only on the gas, but really pressed to the floor in terms of get this economy moving.” Yellen added that with inflation currently running below the Fed’s 2% inflation target and expected to remain low in coming quarters, a focus on helping the job market is “entirely appropriate." As long as the unemployment rate remains above 6.5%, the Fed remains committed to holding short-term interest rates close to zero. Yellen added that, f the threshold is crossed, “action is possible but not assured” because the 6.5% unemployment rate is not a trigger. Several factors that usually help the economy after a recession are now holding it back: fiscal policy, housing and household expectations of future income. Negotiations continue on the so-called sequester that may be reached in March. Yellen said, “I expect that discretionary fiscal policy will continue to be a headwind for the recovery for some time, instead of the tailwind it has been in the past.” Yellen said that the Fed felt it needed to act to bring down the jobless rate because of the devastating impact that long-term unemployment was having on American workers and their families. She added that it will be a "long road back to a healthy job market." “The job market is improving. The progress has been too slow, but there is progress,” Yellen said. She also noted recent evidence that was causing a “rethinking” about the merits of fiscal austerity. The Fed is buying $85 billion per month of Treasurys and mortgage-related bonds in effort to stimulate the economy. The program is open-ended, with the central bank saying that the program will continue until there is “substantial improvement” in the labor market. With no clarity on how long the program would last, the central bank will consider “their efficacy and costs” in deciding whether to continue the purchases and how much to buy per-month. “To me the evidence, both in the US and for Europe, is that fiscal austerity does raise unemployment and weaken an economy and thereby undermine the goals which it is designed to achieve,” Yellen said. If Federal Reserve Chairman Ben Bernanke exits in January 2014, Yellen is a leading contender to replace the Fed boss.

Republican congressman from Orange County, Calif. and member of the House Financial Services Committee, Rep. John Campbell, introduced a bill that seeks to require banks with at least $50 billion in assets to hold an additional level of capital in long-term subordinated debt equal to 15% of the institution’s consolidated assets. The long-term debt holders of a failing big bank would only be guaranteed at 80% of the face value of the debt for these bonds. “With this bill, you get more private capital into these large institutions so that taxpayer risk and systemic risk is reduced,” Campbell said, “This level of capital provides additional security to taxpayers.” The legislation faces tough opposition with a split Congress and Democratic controlled White House. Additional capital restrictions in the bill would be imposed on banks, beyond new capital requirements outlined in a global agreement known as Basel III. “If an institution goes into receivership, we want to make sure that even if it comes out, these bond-holders are going to lose,” Campbell said. “This will make these long-term bond investors more careful.” Campbell said that he disagrees with the notion that his bill does not have much opportunity for success and confirmed he has not yet brought the bill to House Speaker John Boehner. “It is a complex issue that has a complex solution,” Campbell said. “I know a lot of people will find this solution as a good one, better than either affirmatively breaking up the banks or doing nothing as we are doing now.”